Indian govt crypto crackdown unearths new ‘dabba’ trade route

Photo: © Bloomberg

Despite the Indian government’s crackdown on cryptocurrencies traders are finding new ways to get around the rules. While some exchanges have launched peer-to-peer models, a few have begun resorting to what is being referred to as “dabba trading” or making trades outside the order books, usually in an illegal setting different to a formal OTC market.

An article in Indian publication Business Today says this form of trading has been used for decades by Indian stock trades, but saw an upsurge after the government’s April 2018 decision to cease banking activities for the country’s crypto market. Traders now await a judgment in September on cryptocurrencies.

The process is akin to an underground logistics framework for transporting goods and money around the world, where traders execute trades on a platform connected with a foreign bank, usually based in Dubai, Europe, or the U.K.

The brokers accept trades from the investor in cash and buy bitcoins using an overseas trading account. When the investor decides to cash out, the broker pays out the difference in cash, while selling his bitcoins in the foreign trading account and routing money via the underground network.

While the Indian government has a maximum annual remittance limit of $250,000, brokers circumvent this stoppage and continue their business in cash or cheque. To converse, traders and brokers use Telegram instead of WhatsApp or Facebook, presumably to take advantage of the encryption services and protecting identity.

Peer-to-peer exchanges like Koinex Loop and WazirX come to the aid of Indian cryptocurrency users who want to avoid dabba trading. The P2P model avoids the use of international banks accounts entirely.


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